A note for buyers----begin at ZERO.
My friend, Marvin, told me a story once to get the point across. A man wanted to buy a bed. He saw one advertised in the paper and went to look at it. It was a beautiful four poster bed in a very high attic.....and he noticed that the seller seemed anxious. The buyer said he would have to think it over further. About a month later, the buyer called and asked to see it again. Again the seller told him the selling price....but the buyer said he would have to think it over further.
Finally...the buyer stopped in to see the bed one more time and after going over the selling price again, the buyer asked why the seller was selling such a beautiful bed. the seller was exasperated and said, "Well, my lease is up tonight at midnight and I have to have everything out of here. I cannot imagine what else you need to know about this bed." ....To which, the seller replied that now he had the information he needed. He proceeded to offer a mere pittance for the bed and the seller accepted. He had no choice.
When you are the buyer....you wait till you have ALL the information. Secondly...you begin at ZERO...Yes...ZERO....
Wednesday, January 23, 2008
The Story of Marvin:or; When you are buying, buy; When you are selling, Sell; Never Confuse the two
I have always loved books. But at one point, I was curious as to the BUSINESS of books. I knew little about the art of buying, so I asked my friend, Marvin, a liquidation specialist, to keep his eye out for an opportunity for me to learn something about and possibly purchase a book inventory.
On July 31st, it was one of the hottest days of the year, with temps well over 100 degrees. Marvin called. He said he had an opportunity I might be interested in and to meet him at the warehouse of a notable publisher downtown at 4:00PM sharp." O.K.", I said.
As I entered the warehouse, I noted that the temp inside was about 130 deg. and quickly discarded my suitcoat and tie. When I met Marvin, he said, "Just listen, and let me do the talking."
We met the warehouse manager and in his cramped office the temperature seemed to get even worse. He explained he had some "remainders" of computer books and gave us a list of titles and numbers. They totaled almost 20,000. When I saw the numbers, I thought that Marvin was nuts. No way did I have enough to purchase all these. But I remembered his words. I remained silent.
The meeting dragged on forever. Marvin had questions, and questions and questions. Finally, the warehouse staff came in and punched out and left. It was after 6PM. Frustrated, the manager said, "Well, Marvin, I need to do something with all these books. My lease expires on Sunday, and I really need to do something."
Then Marvin spoke. " I am pleased that Dick and I can be of help in this matter. We will see that all these books are removed at no charge to you by Monday morning. The Manager was stunned, but quickly agreed.
When we were outside the building, Marvin took me aside and said, " When you are buying, you are buying; When you are selling, you are selling; Never confuse the two. When you buy, you begin at zero. Now go and rent a truck. We have our work cut out for us. "
Posted by Evansville Observer at 1:39 PM
On July 31st, it was one of the hottest days of the year, with temps well over 100 degrees. Marvin called. He said he had an opportunity I might be interested in and to meet him at the warehouse of a notable publisher downtown at 4:00PM sharp." O.K.", I said.
As I entered the warehouse, I noted that the temp inside was about 130 deg. and quickly discarded my suitcoat and tie. When I met Marvin, he said, "Just listen, and let me do the talking."
We met the warehouse manager and in his cramped office the temperature seemed to get even worse. He explained he had some "remainders" of computer books and gave us a list of titles and numbers. They totaled almost 20,000. When I saw the numbers, I thought that Marvin was nuts. No way did I have enough to purchase all these. But I remembered his words. I remained silent.
The meeting dragged on forever. Marvin had questions, and questions and questions. Finally, the warehouse staff came in and punched out and left. It was after 6PM. Frustrated, the manager said, "Well, Marvin, I need to do something with all these books. My lease expires on Sunday, and I really need to do something."
Then Marvin spoke. " I am pleased that Dick and I can be of help in this matter. We will see that all these books are removed at no charge to you by Monday morning. The Manager was stunned, but quickly agreed.
When we were outside the building, Marvin took me aside and said, " When you are buying, you are buying; When you are selling, you are selling; Never confuse the two. When you buy, you begin at zero. Now go and rent a truck. We have our work cut out for us. "
Posted by Evansville Observer at 1:39 PM
The Risky World of Bonds; or "With a Ginny Mae, You Lose in Every Way."---the story
If you are an experienced investor, or simply older person, you know that there are many ways to lose money in this world. Life is simply about "risk" and "risk assessment". Usually in times of economic stress, folks rush to secure investments. Or, more precisely, what they "think" are secure investments. That rush can be dangersous if the risk is not viewed properly.
So, I wanted to share a little jingle I learned on Wall Street many years ago. The jingle goes, "With a GinnyMae, you lose in every way."
The jingle highlights the perils of investing in bonds in a rising interest rate environment. This may or may not be the world you face right now. Usually bond investors are folks like my father, who invested monthly in bonds, and had a bond guide next to the Bible on the night stand. A child of the depression and WWII years. Back in 1973, it became necessary to review these bonds as interest rates skyrocketed in the Jimmy Carter years. It was not a pretty picture. Bonds took huge losses. It was a lesson I have never forgotten. It is one you need to know.
If you buy a bond as interest rates rise, say at 7%. You are pleased. The rate seems high. The next day, the rate goes to 7.5% Now if you hold the bond to maturity, you will get your principal plus interest, if the company does not default. However, make a note of it, most people sell prior to maturity. So if you wanted to sell that bond on the following day you would lose. After all, who would buy one at 7% when the 7.5% were available.
You may wonder about the GinnyMae jingle. The phrase "every way". In a decreasing interest rate market, people refinance the underlying mortgages and the bond trust usually gets paid off early--just what you don't want. Now you have money to invest with rates lower. So you have investment rate risk. So either in rising or dropping rates you tend to lose..That was the point of the jingle.
The overall point of the jingle is that you CAN lose with bond investments. If you don't understand how this can happen, ask your investment advisor. The purpose of the jingle is just to get your attention.
So, I wanted to share a little jingle I learned on Wall Street many years ago. The jingle goes, "With a GinnyMae, you lose in every way."
The jingle highlights the perils of investing in bonds in a rising interest rate environment. This may or may not be the world you face right now. Usually bond investors are folks like my father, who invested monthly in bonds, and had a bond guide next to the Bible on the night stand. A child of the depression and WWII years. Back in 1973, it became necessary to review these bonds as interest rates skyrocketed in the Jimmy Carter years. It was not a pretty picture. Bonds took huge losses. It was a lesson I have never forgotten. It is one you need to know.
If you buy a bond as interest rates rise, say at 7%. You are pleased. The rate seems high. The next day, the rate goes to 7.5% Now if you hold the bond to maturity, you will get your principal plus interest, if the company does not default. However, make a note of it, most people sell prior to maturity. So if you wanted to sell that bond on the following day you would lose. After all, who would buy one at 7% when the 7.5% were available.
You may wonder about the GinnyMae jingle. The phrase "every way". In a decreasing interest rate market, people refinance the underlying mortgages and the bond trust usually gets paid off early--just what you don't want. Now you have money to invest with rates lower. So you have investment rate risk. So either in rising or dropping rates you tend to lose..That was the point of the jingle.
The overall point of the jingle is that you CAN lose with bond investments. If you don't understand how this can happen, ask your investment advisor. The purpose of the jingle is just to get your attention.
The Simple Math; or The Coming Disconnect
he Janesville Gazette lead with a story today on the impact of rising utility costs over the past decade. If you just do the math, it just does not add up. There is a big disconnect coming.
The baby boomers that will enter retirement have a social security benefit that will average $1100 per month. It is easy for utilities and gasoline and meds to eat all that up, leaving nothing to eat or living expenses. It is time for all you independent types out there to review your IRA and 401K results for the past 10 years. O.K. That was a short review. I was refering to the statements that you have been unable to even open for years cause the results were so bad.
Despite 5 or 6 hurricanes, folks are heading to Florida. Down South. Out West. Anywhere. To avoid the energy crisis. And companies are relocating to the West and South to avoid the coming distress of the Northeast and Midwest. This does not bode well for those communities that are on a "growth bicycle". Growth is needed. Government investments cannot be wasted in nonproductive pork. Tax increment is important. Jobs are important. Tax base is important.
Jimmy Carter wore his cardigan sweater and told America 30 years ago that we needed to be energy independent. America just laughed at him. Now, America is paying the price.
The baby boomers that will enter retirement have a social security benefit that will average $1100 per month. It is easy for utilities and gasoline and meds to eat all that up, leaving nothing to eat or living expenses. It is time for all you independent types out there to review your IRA and 401K results for the past 10 years. O.K. That was a short review. I was refering to the statements that you have been unable to even open for years cause the results were so bad.
Despite 5 or 6 hurricanes, folks are heading to Florida. Down South. Out West. Anywhere. To avoid the energy crisis. And companies are relocating to the West and South to avoid the coming distress of the Northeast and Midwest. This does not bode well for those communities that are on a "growth bicycle". Growth is needed. Government investments cannot be wasted in nonproductive pork. Tax increment is important. Jobs are important. Tax base is important.
Jimmy Carter wore his cardigan sweater and told America 30 years ago that we needed to be energy independent. America just laughed at him. Now, America is paying the price.
The Sheep Rule: "The Many are the Sheep; Follow the Few"
(As a very young man, the Observer worked for the IRS during tax season. )
At the beginning of the tax season, it was depressing to key returns, because alas it was the many poor people who typically rush to file returns. Of all of America, the rich comprise about 1%. Maybe you have noticed the disparity of wealth in America......like the largest disparity since the 1920's.
If you do not believe this, begin calling people and asking them to invest $5000 in an attractive investment. 99% of people simply don't have the money. And as a corollary, one of the ways of getting in trouble as a financial professional is to persist in marketing to these folks.
At the beginning of the tax season, it was depressing to key returns, because alas it was the many poor people who typically rush to file returns. Of all of America, the rich comprise about 1%. Maybe you have noticed the disparity of wealth in America......like the largest disparity since the 1920's.
If you do not believe this, begin calling people and asking them to invest $5000 in an attractive investment. 99% of people simply don't have the money. And as a corollary, one of the ways of getting in trouble as a financial professional is to persist in marketing to these folks.
"Have You considered the Possibility that you May be WRONG?
The very first rule of all investments.....
"Old School Ties"--; or The Good, The Bad, The Illegal"
OpEd: Old School Ties: The Good, the Bad, The Illegal---commentary
On Saturday, June 9, 2007, I had the pleasure to meet an old alum from high school. It was back in 1963 when "M" was an ace photographer, and we had worked together on some articles for the school yearbook. In a reflective moment recently, I had reviewed all the classmates of yore, and his name popped up--I knew he was a writer. So---one Saturday night I started cold calling names that looked similar and ran across his father, now 92, who helped me get in touch. Now at the Caribou Coffee at Hwy 101 and Hwy 7 we had a moment to step back in time.
The very first thing "M" did after shaking hands, was to hand me the Business Day article from the New York Times that read " Quantifiying the Role of Old-School Ties In Investing." Click on the post for the full article.
At first I thought it was nothing really new. It's who you know not what. It was the "prestige" of the school not the content that mattered. Yes. Those were the rules of the few. Back applying for grad school, I had learned all this---just by filling out the graduate school application for Harvard. Pretty straightforward. Two or three small lines for academic awards to be listed. Then a huge space. "List the relatives, alums and donors of Harvard from your family. If you need additional space feel free to attach additional sheets."
It has always been there. The cozy bars off Wall Street where the traders congregate after hours telling tales of victory and defeat. That is what I had thought. Maybe it was making plans for victory in the future not the past that was being discussed.
The Business Day article in the New York Times suggests that "alums" and their connections had a dramatically better investment performance than ....regular investors. Regulators now are beginning to use that vast computer power to compare the trading records of investors and use "alum status" as one of the things to review.
Kind of a shock. I should have been prepared. After all, if Alums can launch wars abroad with little thought as to the factual basis, I guess investing is fair game.
The next time you get a call from an alum with a great stock tip---remember---it is always best to do the research yourself. Sophisticated crime is still......crime. Make a note of it.
On Saturday, June 9, 2007, I had the pleasure to meet an old alum from high school. It was back in 1963 when "M" was an ace photographer, and we had worked together on some articles for the school yearbook. In a reflective moment recently, I had reviewed all the classmates of yore, and his name popped up--I knew he was a writer. So---one Saturday night I started cold calling names that looked similar and ran across his father, now 92, who helped me get in touch. Now at the Caribou Coffee at Hwy 101 and Hwy 7 we had a moment to step back in time.
The very first thing "M" did after shaking hands, was to hand me the Business Day article from the New York Times that read " Quantifiying the Role of Old-School Ties In Investing." Click on the post for the full article.
At first I thought it was nothing really new. It's who you know not what. It was the "prestige" of the school not the content that mattered. Yes. Those were the rules of the few. Back applying for grad school, I had learned all this---just by filling out the graduate school application for Harvard. Pretty straightforward. Two or three small lines for academic awards to be listed. Then a huge space. "List the relatives, alums and donors of Harvard from your family. If you need additional space feel free to attach additional sheets."
It has always been there. The cozy bars off Wall Street where the traders congregate after hours telling tales of victory and defeat. That is what I had thought. Maybe it was making plans for victory in the future not the past that was being discussed.
The Business Day article in the New York Times suggests that "alums" and their connections had a dramatically better investment performance than ....regular investors. Regulators now are beginning to use that vast computer power to compare the trading records of investors and use "alum status" as one of the things to review.
Kind of a shock. I should have been prepared. After all, if Alums can launch wars abroad with little thought as to the factual basis, I guess investing is fair game.
The next time you get a call from an alum with a great stock tip---remember---it is always best to do the research yourself. Sophisticated crime is still......crime. Make a note of it.
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